Arbitration as a means to resolve a dispute between parties has gained global traction for many decades. Its popularity as a dispute resolution mechanism in the commercial sphere has gained so much popularity that legal systems have not only recognised it as a means of dispute resolution but are encouraging parties to resolve disputes of a commercial nature through arbitration.
In Pakistan, since the appointment of judges to the superior judiciary is being debated these days, it is apt that the appointment of arbitrators and the process governing such appointments also be discussed.
In Pakistan, the Arbitration Act, 1940 governs and regulates matters relating to arbitration. The principle of party autonomy (a core principle of arbitration and the foundation of its success) is evidently reflected in the 1940 Act. Thus, as a matter of law, parties can by agreement choose a person as an arbitrator to resolve the dispute between them. The number of arbitrator(s) can also be agreed upon by the parties in the arbitration agreement.
However, in practice, arbitration agreements or arbitration clauses are drafted in a way that they only mention that the dispute between the parties will be referred to arbitration in accordance with the 1940 Act. In a large majority of commercial contracts, there is no mention of the number of arbitrators and the appointment procedure. This opens the door for the courts to step in and appoint an arbitrator under the powers granted by the 1940 Act.
At this stage, a large number of arbitrator appointments are made. Surprisingly, there appears to be no benchmark or criteria which govern such appointments by the courts. It has been seen in a majority of cases that given the nature of the dispute, the arbitrator appointed by the court is either a retired judge or a practising lawyer. Perhaps the only aspect that is kept in mind by the court while making an appointment is that the judge or the lawyer has no conflict of interest. This is a very important requirement but in the context of resolving commercial disputes is perhaps not the only requirement that should be kept in mind.
There is a need to streamline the process of appointment of arbitrators in Pakistan. To this end, there is a need to develop a benchmark based on which an arbitrator should be appointed by the courts if the parties are unable to agree to an arbitrator mutually. In addition to the mandatory requirement that an arbitrator should be independent and impartial, the following broad criteria may be considered as well:
An arbitrator should be trained in the basics of the law, as well as contracts. This does not mean that the arbitrator should be a lawyer or a retired judge only. What this means is that the arbitrator should have undertaken some training in the basics of law. An arbitrator should be able to understand that a dispute will require him or her to give a finding on not only questions of facts but also questions of law.
The arbitrator should be able to understand that in arriving at a finding on questions of facts, certain basic rules of evidence are to be factored in while giving a finding. The arbitrator must understand that the questions of law are to be decided in view of the legal precedents settled in the jurisdiction.
The arbitrator must be able to understand and resolve questions about the interpretation of a document or a contract, and the rules of interpretation that are to be applied. Without these basics, the arbitrator will end up rendering an award which will end up doing injustice as opposed to justice between the parties.
Arbitrators should be trained to understand that, while CPC applies to civil trials, it does not apply to arbitrations – but that does not mean that an arbitration is to be conducted without any procedure and process. The minimum procedural requirements must be settled by the arbitrator on the first hearing and must be followed thereafter to ensure procedural fairness and certainty in the process. The only exception should be the agreement of the parties to amend the procedure at any stage. Barring such an agreement, there should not be a unilateral deviation from the procedure agreed to between the parties.
The procedure agreed upon can even empower the arbitrator to impose costs or proceed ex-parte if a party is employing delaying tactics. The procedure adopted can empower the arbitrator to apply the rules of evidence as the arbitrator deems fit in the circumstances. But the point here is that the arbitrator must ensure that a procedure is agreed to between the parties on the first hearing to avoid unnecessary delays in the arbitral process.
Arbitrators do not necessarily need to have a law degree. But a certification or some training reflecting his or her skills as an arbitrator must be mandatory for an appointment as an arbitrator.
A court-appointed arbitrator should be allowed to be interviewed by the parties to ensure that the arbitrator has a basic understanding of law and contracts. And has the skills required to understand complicated or even simple contractual disputes.
The arbitrator should have the required skills to render an award which will reflect the arbitration proceedings, the issues involved and the findings of the arbitrator in line with the assistance rendered by the parties.
The above suggestions, if considered by the courts or even by the parties while appointing arbitrators, are bound to have a positive impact on the outcome of arbitration. The appointment of an arbitrator plays an important role in the arbitration process, and in fact, is one of the major reasons for the parties requesting the courts for a detailed scrutiny of the arbitral awards once they are rendered.
The writer is an advocate of the Supreme Court. He can be reached at: wasimabidgmail.com